Don’t Cry for Me, Ben Bernanke

The Federal Reserve will decide on monetary policy for the US based primarily on US conditions. Economic policymakers elsewhere who are pleading for a postponement of US monetary tightening should understand this hard reality and prepare accordingly.

WASHINGTON, DC – Financial volatility since Federal Reserve Chairman Ben Bernanke’s announcement in May that the Fed would “taper” its monthly purchases of long-term assets has raised a global cry: “Please, Mr. Bernanke, consider conditions in our (non-US) economies when you determine when to end your quantitative-easing policy.”

That is not going to happen. The Fed will decide on monetary policy for the United States based primarily on US conditions. Economic policymakers elsewhere should understand this and get ready.

It is true that, in recent years, the Fed has shown more concern about financial conditions in other parts of the world. In the fall of 1998, then-Fed Chairman Alan Greenspan favored lowering interest rates, in part because of the emerging-markets crisis in Asia and Russia. For those efforts, he got his picture on the cover of Time magazine as part of the so-called “committee to save the world.”

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